ITO WD 19(3)(4), MUMBAI V. SHABBIR AHMED SHAIKH, MUMBAI

ITA 756/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8370 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 07-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 03-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NEHA PARANJAPE
• Section: 40A(3); 143(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.756/MUM/2014 ASSESSMENT YEAR: 2009-10 INCOME TAX OFFICER - 19(3)4, PIRAMAL CHAMBER, R. NO.304, LALABAUG, MUMBAI-400012 / VS. SHRI SHABBIR AHMED SHAIKH, ROOM NO.38, DAULAT CHEMIST LANE, BEHARAM NAGAR, BANDRA (EAST), MUMBAI-400051 ( / REVENUE) ( ! ' /ASSESSEE) P.A. NO. AHHPM0132F ! ' / ASSESSEE BY SHRI K. GOPAL & MS. NEHA PARANJAPE / REVENUE BY SHRI VISHWAS MUNDHE-DR # $ ' % / DATE OF HEARING : 23/02/2017 $ ' % / DATE OF ORDER: 27/02/2017 SHABBIR AHMED SHAIKH ITA NO.756/MUM/2014 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 29/11/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED BY THE REVENUE PERTAINS TO DELET ING THE ADDITION OF RS.1,04,11,952/- MADE U/S 40A(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT), WITHOUT APPREC IATING THE FACT THAT THE ASSESSEE IS NOT COVERED UNDER EXCEPTI ON TO RULE- 6DD OF THE RULES IN RESPECT OF PAYMENT MADE IN CAS H FOR VARIOUS EXPENSES AT HAJ TOURS. 2. DURING HEARING OF THIS APPEAL, THE LD. DR, SHRI VISHWAS MUNDHE, DEFENDED THE ADDITION MADE IN THE ASSESSMENT ORDER BY ADVANCING ARGUMENTS, WHICH IS I DENTICAL TO THE GROUND RAISED BY CONTENDING THAT THE ASSESSE E IS NOT COVERED UNDER EXCEPTION TO RULE-6DD OF THE RULES IN RESPECT OF PAYMENT MADE IN CASH. ON THE OTHER HAND, THE LD. C OUNSEL FOR THE ASSESSEE, SHRI K. GOPAL, ALONG WITH MS. NEHA PA RANJAPE, DEFENDED THE ADDITION DELETED BY THE LD. COMMISSION ER OF INCOME TAX (APPEAL) BY INVITING OUR ATTENTION TO PA GES-36 AND 37 OF THE PAPER BOOK. IT WAS CONTENDED THAT THE ASS ESSEE WAS NOT HAVING ANY BANKING FACILITY/ACCOUNT ABROAD. IT WAS ALSO ASSERTED THAT NO EXPENSES WERE INCURRED IN RUPEES I N SAUDI ARAB/ABROAD AND ONLY FOREIGN CURRENCY WAS USED. IT WAS ALSO BROUGHT TO OUR NOTICE THAT IN EARLIER YEAR, IDENTIC ALLY, THE TRIBUNAL REMANDED THE MATTER BACK TO THE FILE OF TH E ASSESSING OFFICER VIDE ORDER DATED 12/02/2014 (ITA NO.556/MUM /2012) SHABBIR AHMED SHAIKH ITA NO.756/MUM/2014 3 AND THE LD. ASSESSING OFFICER EXAMINED THE FACTUAL MATRIX AND FINALLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE . THIS ASSERTION OF THE LD. COUNSEL WAS NOT CONTROVERTED B Y THE REVENUE. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION O F THE AFORESAID ORDER OF THE TRIBUNAL DATED 21/02/2014 FO R ASSESSMENT YEAR 2007-08 FOR READY REFERENCE AND ANA LYSIS:- THIS APPEAL FILED BY THE ASSESSEE ON 27.1.2012 IS AGAINST THE ORDER OF THE CIT (A)-30, MUMBAI DATED 14.11.2011 FOR THE ASSE SSMENT YEAR 2007-2008. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GRO UNDS WHICH READ AS UNDER: 1. THE CIT (A) ERRED IN DISALLOWING RS. 11,12,760/- U/S 40A(3) OF THE IT ACT, 1961 R.W. RULE 6DD OF THE INCOME TAX RULES, 196 2. 2. THE CIT (A) HAS NOT CONSIDERED THE NATURE OF ASSES SEES TRADE AND SUBMISSION MADE BY HIM. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONDUCTING HAJ TOURS. A SSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 2,15,064/-. ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 13,72,820/-. DURING THE ASSESSMENT PROCEEDINGS, AO INVOKED THE PROVISIONS OF SECTION 40A (3) OF THE ACT IN RESPECT OF AMOUNTS DEBITED OF RS. 7,30,800/- AS PURCHASES AND RS. 48.33 LAKHS ACACCOMMODATION EXPENSES. AO MADE DISALLOWANCE @ 20% OF THE ABOVE SUM I.E., RS. 55,63 ,800/-. AO MADE ADDITION OF RS. 11,12,760/- BEING 20% OF THE S AID EXPENDITURE. BEFORE THE REVENUE AUTHORITIES, IT WAS SU BMITTED THAT SHABBIR AHMED SHAIKH ITA NO.756/MUM/2014 4 THE ASSESSEE COLLECTS LIKELY EXPENDITURE ON ACCOUNT OF TOURS TO HAJ FROM THE CLIENTS AND SPENDS THE SAME ON THEIR BEHALF. WHEN THEY ARE TAKEN ON TOUR TO ABROAD, BUYING AND SELLING OF FORE IGN EXCHANGE IS DONE BY THE ASSESSEE ON BEHALF OF THE C LIENTS IN ACCORDANCE WITH THE RULES OF RBI. THE ASSESSEE HAS DO NE THESE THINGS IN THE CAPACITY OF AN AGENT OR AN AUTHORIZE D DEALER AND HE IS NOT COVERED UNDER THE PROVISIONS OF SECTION 6DD( L) WHICH PROVIDES THAT WHERE THE PAYMENT IS MADE BY A AUTHORIZ ED DEALER OR A MONEY CHANGER AGAINST PURCHASE OF FOREIGN CURRENCY OR TRAVELERS CHEQUES IN THE NORMAL IN THE NORMAL COURSE OF HIS BUSINESS. THERE IS AN EXPLANATION FOR THE EXPRESSION AUTHORIZED DEALER AND MONEY CHANGER. HE HAS ALSO MENTIONED TH AT THE SOUDI ARABIAN HOTELS DO NOT ACCEPT THE PAYMENTS IN C HEQUES. THE ASSESSEE, BEING AN AGENT, HE COLLECTS THE TOUR CHARGE S AND CONVERT THEM INTO FOREIGN EXCHANGE TO MEET THE EXPENSES OF T HE CLIENTS. THEREFORE, THE SAID CLIENTS OF THE ASSESSEE ARE NOT REQ UIRED TO MAKE PAYMENT BY A/C PAYEE CHEQUES OR DRAFT IN VIEW OF RULE 6DD(1) OF THE ACT WHICH PROVIDES THAT WHERE THE PAYMENT IS MAD E BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHALF OF SUCH PERSON. IT WAS A LSO CONTENDED BEFORE THE LOWER AUTHORITIES THAT THE PROVISIONS OF SEC TION 1 OF THE INCOME TAX ACT, 1961 IS APPLICABLE TO WHOLE OF INDI A AND NOT OUTSIDE INDIA. IT IS THE CLAIM OF THE ASSESSEE THAT SINCE, THE PAYMENTS ARE MADE OUTSIDE INDIA AND SUCH PAYMENTS ARE MADE FOR DAY-TO-DAY FOOD AND MATERIALS, THE PROVISIONS OF SECT ION 40A(3) ARE NOT APPLICABLE. NOT SATISFIED WITH THE SUBMISSIONS OF THE ASSESSEE, AO CAME TO THE CONCLUSION THAT THE ASSESSEE COULD N OT SUBSTANTIATE THAT THE CLIENTS WERE INSISTED ON CASH PAYMENTS AND IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE AND RELATABLE BOOKS OF A CCOUNTS TO VERIFY THE SAME, THE AO INVOKED THE PROVISIONS OF SEC TION 40A(3). ACCORDINGLY, AO MADE ADDITION OF RS. 11,12,760/- BEI NG 20% OF THE TOTAL CASH EXPENDITURE UNDER THE HEAD ACCOMMODATION AND PURCHASES. RELEVANT DISCUSSION IS GIVEN IN PARA 4 A ND ITS SUB- PARAS OF THE ASSESSMENT ORDER. AGGRIEVED WITH THE DECIS ION OF THE AO, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FI RST APPELLATE AUTHORITY. SHABBIR AHMED SHAIKH ITA NO.756/MUM/2014 5 4. DURING PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORI TY, ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO. AFTER CO NSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) DISMISSED THE APPEAL OF THE ASSESSEE AND CONFIRMED THE ADDITION OF RS. 11,12,760 /- MADE BY THE AO BY HOLDING THAT THE AO IS QUITE JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND MAKING A N ADDITION OF RS. 11,12,760/- BEING 20% OF CASH EXPENSES EXCEEDIN G RS. 20,000/-. FURTHER, CIT (A) HAS ALSO CONCLUDED THAT THE ASSESSE ES CASE IS NOT COVERED UNDER THE PROVISIONS OF RULE 6DD(1) OF THE IN COME TAX RULE, 1962. AGGRIEVED WITH THE DECISION OF THE CIT ( A), ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABO VE MENTIONED GROUNDS. 5. DURING THE PROCEEDINGS BEFORE US, DR. RAJENDRA KUMAR JAIN, LD COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MA DE BEFORE THE LOWER AUTHORITIES. FURTHER, LD COUNSEL SUBMITTED T HAT THE ASSESSEE HAS INCURRED THE SAID EXPENSES IN THE CAPACI TY OF AN OPERATOR AND THE RECEIPTS CONSIST OF REIMBURSEMENT OF EX PENSES INCURRED BY THE ASSESSEE ON BEHALF OF THE CLIENTS AND THE ASSESSEE COLLECTS FEES FOR THAT PURPOSE. THE HOTELS IN SOUDI COUNTRY DO NOT ACCEPT PAYMENTS IN CHEQUE. AS SUCH, THE ASSESSEE IS NOT HAVING ANY BANKING FACILITY IN THAT COUNTRY NEITHER HE IS REQUIRED TO HAVE SUCH FACILITY. IT IS ALSO SUBMITTED BY THE LD COUNSEL TH AT THE ENTIRE PAYMENT OF ACCOMMODATION EXPENSES HAS BEEN MADE IN SAUDI RIYAL AND NOT IN CASH. THEREFORE, ASSESSEE, BEING AN INDIAN CITIZEN, IS LIABLE TO BE COMPLIED WITH ALL THE PROVISIONS OF IT ACT, 1961 WHETHER IN INDIA OR OUTSIDE INDIA ACCORDINGLY, THE PROV ISIONS OF RULE 6DD(1) ARE APPLICABLE. 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF TH E REVENUE AUTHORITIES. FURTHER, LD DR SUBMITTED THAT THE IN ORDE R TO FALL WITHIN THE EXCEPTION CLAUSE OF RULE 6DD, THE ONUS IS ON TH E ASSESSEE TO PROVE THAT THE SUCH PAYMENTS THROUGH CHEQUES OR DEMAN D DRAFTS WERE NOT PRACTICABLE AND WOULD HAVE CAUSED GENUINE DI FFICULTY TO THE PAYEE HAVING REGARD TO THE NATURE OF TRANSACTION A LONG WITH SUPPORTIVE EVIDENCES. BUT, THE SAME WAS NOT DISCHARGE D BY THE SHABBIR AHMED SHAIKH ITA NO.756/MUM/2014 6 ASSESSEE, THEREFORE, THE DECISION TAKEN BY THE LOWER A UTHORITIES IS PROPER BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDE RS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON HEARING BOTH THE PARTIES AND PERUSING THE FACTS PLACED BEFORE US, IT APPEARS THAT THE ASSESSEE HAS INCURRED TH E SAID EXPENDITURE IN THE CAPACITY OF AN OPERATOR AND IN THAT CASE, IT MAY CONSTITUTE A CASE OF REIMBURSEMENT. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT FOR THE PURPOSE OF EXAMINING THE SAME THE MATTER SHOULD BE REMANDED TO THE FILES OF THE AO. ACC ORDINGLY, WE REMAND THE ISSUE TO THE FILES OF THE AO AND DIRECTED HIM TO EXAMINE THE SAME AFRESH AFTER GRANTING A REASONABLE OP PORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUNDS RA ISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. WE FIND THAT ON IDENTICAL FACTS/ISSUE, IN THE CASE OF ASSESSEE ITSELF, FOR ASSESSMENT YEAR 2007-08, THE T RIBUNAL EXAMINED THE FACTS AND FOUND THAT THE ASSESSEE HAD PERFORMED HIS DUTY/JOB IN THE CAPACITY OF AN AGENT OR AN AUT HORIZED DEALER, THEREFORE, HE IS NOT COVERED UNDER THE PROV ISIONS OF RULE 6DD(1) OF THE RULE. THERE IS AN EXPLANATION F OR THE EXPRESSION AUTHORIZED DEALER AND MONEY CHANGER. IT IS ALSO NOTED THAT HOTELS IN SAUDI ARABIAN DID NOT ACCEPT T HE PAYMENT IN CHEQUE AND THE ASSESSEE, BEING AN AGENT, COLLECT THE TOURS CHARGES AND CONVERTS THEM INTO FOREIGN EXCHANGE TO MEET THE DAY TO DAY NEED OF HIS CLIENTS. FINALLY, THE MATTE R WAS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER BY THE TRIBUNAL. PURSUANT TO THE ORDER OF THE TRIBUNAL, TH E ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 28/03/2016 EXAM INED THE SHABBIR AHMED SHAIKH ITA NO.756/MUM/2014 7 FACTUAL MATRIX AND FINALLY ACCEPTED THE VERSION OF THE ASSESSEE AND ALLOWED THE CLAIMED EXPENSES DISALLOWED U/S 40A (3) OF THE ACT. NO CONTRARY FACTS WERE BROUGHT TO OUR NOTICE, THEREFORE, WE FIND NO INFIRMITY IN THE CONCLUSION OF THE LD. COMM ISSIONER OF INCOME TAX (APPEAL). WE AFFIRM THE SAME. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 23/02/2017. SD/- SD/- ( RAMIT KOCHAR ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $ # / JUDICIAL MEMBER # MUMBAI; ' DATED : 27/02/2017 F{X~{T? P.S / ( %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. )*+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. / / # 0' ( )* ) / THE CIT, MUMBAI. 4. / / # 0' / CIT(A)- , MUMBAI 5. 23 -' , / )*% ) 4 , # / DR, ITAT, MUMBAI 6. 5 6 / GUARD FILE. / BY ORDER, .2*' -' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , # / ITAT, MUMBAI,